Pay transparency: from directive to policy

In May 2023, the European Council adopted new rules around pay transparency. These rules are set to enter into force within two years. This European directive requires companies in the European Union to disclose their payroll information.

The purpose? To combat wage discrimination and to close the gender pay gap. The directive also sets out provisions on compensation for victims of wage discrimination and penalties, including fines, for employers who break the rules.

The road to the uniform implementation of the directive starts on the shop floor. How openly do we actually communicate about pay at work? According to our latest survey figures, six in 10 companies clearly communicate to their employees how much they will earn in a particular job.

Pay is also a hot topic among colleagues: six in 10 employees know how much their colleagues earn.

The new directive requires companies to report on exactly how transparent they are about the criteria that determine salaries and wage increases. Obviously this requires employers to be duly informed about this. So it pays to talk about pay. Not just because it is being imposed by a higher authority, but also to strengthen the relationship between the company and its employees. An added strong suit in a tight labour market.

This not only ensures pay transparency within the company but also within the industry or between similar companies.  A company that already pays competitive salaries will now find it easier to compete with companies that do pay apply market-compliant wages.

 Employers are often unaware of possible wage discrimination. Unintentionally, a bias appears to exist within the company.  With the new directive, increased pay transparency raises awareness among employers and helps them detect and rectify such discriminations more quickly.

If you mean to be transparent about remuneration, you need to have a clear pay policy in place, which your employees should know about. Make sure people know what they need to do to earn their salary or qualify to get a pay rise. As a company, how do you embark on this exercise?

• Ensure correct remuneration: fair and market-compliant;
• Give your employees security and prospects when it comes to pay;
• Chart experience, performance and achievements;

With a well-thought-out pay policy, you improve your employees’ commitment and satisfaction. Which is a win-win situation as that is how you keep your talented workers on board.